The Merrill Lynch Investigation

Paper Summary:

This paper explains that the Justice Department, the Senate and the Securities and Exchange Commission conducted investigations into Merrill Lynch's participation in deals to help mask the true financial condition of Enron; Merrill Lynch denied any wrong-doing and said that its dealings with Enron were proper and legal. The author points out that an allegation against Merrill Lynch was the purchase of three barges from Enron; investigators claimed that Merrill Lynch did not buy these barges as a legitimate investment but purchased them to secure future business from Enron. The paper reports that Merrill Lynch said that it is not unusual for employees of brokerage firms to invest in companies that they do business with and that other large brokerage houses have made similar investments.

Table of Contents
Discussion
Nigerian Barge Deal
Departure of Analyst
Other Dealings

From the Paper:

"The second allegation concerning Merrill Lynch's dealings with Enron concerns the sudden departure of analyst John Olson from the brokerage firm in August, 1998. Mr. Olson was the Merrill Lynch analyst who followed Enron. In 1997, he had downgraded Enron stock to a "neutral" rating. Documents from Merrill Lynch indicate that Andrew Fastow, then Chief Financial Officer for Enron, told Merrill Lynch executives that he was unhappy with Merrill Lynch's poor rating for Enron stock and that as a result, Merrill Lynch would not be allowed to participate in a lucrative Enron stock offering. Sources close to the investigation say that Mr. Olson was then forced to resign. Merrill Lynch denies this charge, and Mr. Olson, now working for another firm, declined to comment."

More papers on The Merrill Lynch Investigation:

• Case Study # 71915 : "Case Study: Merrill Lynch"
• Analytical Essay # 125501 : "Strategic Issues at Merrill Lynch"
• Case Study # 121176 : "Merrill Lynch in Japan"

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